New Deal Cuts Risks in Rwanda's Agro Financing, Reports KT Press

    KIGALI, RWANDA, March 11, 2015 /24-7PressRelease/ -- Smallholder farmers in Rwanda are getting luckier as more financing schemes pop-in for agriculture projects, which most local banks consider riskier to invest in.

The East Africa Exchange (EAX) and ABC Bank on March 7, in Nairobi Kenya, signed an agreement that will enable Rwandan farmers borrow against their projected harvest.

The deal will also enable farmers protect their produce against storage-related damage and negotiate for better prices.

Dr. Alfah Kadri, the EAX Country Manager had told KT Press the company had been negotiating with financial institutions for, "an agreement that would allow ordinary farmers to access loans through their cooperatives."

A survey published in 2013 indicated that all 17 commercial banks in Rwanda find agriculture risky to invest in. Loan requests are often shelved. Additionally, farmers have been struggling with market prices for decades where middlemen offer the lowest prices possible.

Rwandan farmers can produce 500,000 metric-tons of maize and beans per season. The EAX has recruited 17 cooperatives, representing over 15,000 farmers. When maize is scarce, the price shoots up to Rwf255 ($0.36) but middlemen offer Rwf170 ($0.2).

However, under the new deal, a farmer or trader will deliver his produce to a warehouse that has been approved by the bank. There will be no middlemen.

The bank will then issue a warehouse receipt vouching for the quantity and quality of produce being stored and take the receipt as collateral against which they provide financing to the farmer or trader.

"The warehouse receipt resolves a series of problems, including; protecting the traders from losing their produce in their own storage before reaching the market, and is also a great way of freeing up financing for the farmer," says Constantine Kandie, Kenya Director for EAX.

ABC Bank Group Managing Director, Shamaz Savani said, "With warehouse financing solutions, Small holder farmers will be able to bargain for better prices for their produce.

This gives them capacity to produce more, create employment and contribute more to economic development.

Dr. Jendayi Frazer, former U.S. Assistant Secretary of State for African Affairs, is Board Chair and Managing Partner of the US$10m commodities firm. She said, "Our goal is to be a major stakeholder in the transformation of agriculture by formalizing the East Africa market, providing farmers with greater bargaining power."

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